By Rupin Chopra and Vikram Narula
On account of a recent amendment in the GST law, input tax credit (“ITC”) has been reduced to 10% from 20% of eligible ITC in case invoices /debit notes are not reflected during the filings of the returns.
The amendment in the Central Goods and Services Tax Rules, 2017 has been notified and is effective from January 01, 2020.
As per the amendment, GST commissioners are permitted to disallow ITC for a period of one year in case an invoice is generated fraudulently from a company that does not exist; does not involve the supply of goods or services, arises on account of a taxable supply however the tax charged on such invoices is not paid to the Government.
The purpose of such amendment is to plug the leakages and evasion ever since the authorities have observed the rise in fraudulent utilization of ITC
The GST Council had approved a proposal in to this effect at its earlier meeting for maintaining a tab on tax evasion and controlling the activity of issuance of fake invoices.
This amendment although beneficial for the Government will affect businesses especially small businesses and also pose liquidity concerns for them. The Government is ensuring implementation of strict steps to prevent evasion and adherence to the law.
Can a person without GST registration claim ITC and collect tax?